Whenever we make a decision, whether it be in business or just going about our daily lives, we find ourselves relying on information; information that is presented to us by the mass media, business colleagues, superiors, subordinates, friends, associates and strangers, all packaged in different ways. This information can range from obvious statements of fact to coffee-machine gossip, but it all shares one thing in common: how it is presented, and thus perceived, impacts on how we act.
This presentation of information is usually offered as either fact or opinion, but it isn’t always clear which is which, and that is a problem. Acceptance of flawed information can lead to it becoming seen as conventional wisdom, or worse still, hard fact. Basing decisions on flawed information can be limiting at best, or catastrophic at worst. We need to understand what is being presented, and that is what makes some decision-making difficult.
So how do we go about separating the wheat from the chaff? First of all, we need to understand the nature of the information presented to us, which means we have to define it. Essentially, all rational statements (our information) can be defined as follows:
Facts – statements that are known or proven to be true
Assumptions – statements believed to be true and designed to represent the truth
Assertions – deductive statements made without supporting evidence
Falsehoods - essentially fabrications or misinformation
To determine which is which, the following simple rule of thumb is useful:
Facts are truth and are based only on evidence
- and that can be confirmed
Assumptions require at least some evidence
- and that can be examined
Assertions involve a leap of faith or dogma and have no evidence
- and that can be challenged
Falsehoods either have no evidence or there is contradictory evidence
- and that can also be challenged
Properly understanding what we are being presented with not only enhances decision-making (important enough in itself), it also lets us consider new and better ways of doing things, some of which may be counter-intuitive. Consider the following:
In 1914, Henry Ford decided to double the wages of his assembly line workers and reduce the price of the Model T. Counter-intuitive in the extreme, but he and James Couzens examined the assumption that higher costs and lower prices would lead to reduced profitability, and reasoned that by paying their workers more and reducing the price of a Model T, they were expanding the market for their product (Ford workers could now afford to buy what they were making).
Fortunes can be made by questioning assumptions.
In 2000, a fledgling media-streaming company offered themselves up to Blockbuster for $50 million. Blockbuster turned Netflix down and of course the rest is history. Yet Blockbuster realised their lost opportunity and were beating Netflix at their own game by 2007, so what went wrong? Many things, of course, but essentially Blockbuster’s last 3 CEOs all accepted the assertion their company was a retail business rather than an entertainment business. Their consequent backing away from the Internet and media streaming (entertainment) to focus on their previously successful video rental (retail) structure let Netflix off the hook. Blockbuster were bankrupted in 2010 while Netflix went on to be valued at over $28 billion.
Companies are lost by hardening unchallenged practices into shackles.
So what can you do to avoid the pitfalls and capitalize on the opportunities? Basically, you need better understanding. That involves being prepared to question the consensus. Even if that consensus proves to be correct, by challenging or examining it, you will better understand it. Better understanding leads to improved Situational Awareness, which in turn leads to better decision-making. When you hear a statement containing “obviously”, ask the speaker whether that statement is based on evidence. Is the speaker obeying a law of physics or coasting with the consensus? If the speaker has no evidence, you are being presented with an assertion.
Adopting such a mindset, and encouraging your staff to do so, will pay dividends through process improvement, better productivity, more agility and an increase in innovation. Am I making an assertion here, or am I offering you an assumption to work with? Try it out and see. Examine, challenge and confirm or repudiate what I say.
Success comes from making good decisions, and failure often comes about through bad decision-making.
In finishing, I would say ALL assumptions should be examined, ALL assertions should be challenged, and never, ever abandon your curiosity in the face of conventional wisdom.